On Thursday, Wells Fargo reaffirmed its Overweight rating on shares of Masimo Corp (NASDAQ:MASI) with a steady price target of $160.00. This follows the recent legal developments where a California federal judge granted Masimo's request for a bench trial in its ongoing trade secrets litigation against Apple Inc (NASDAQ:AAPL). The decision, made on Monday, favored a bench trial, which is commonly approved when the plaintiff seeks only equitable relief rather than a monetary award.
Masimo had informed the court in late August that it was not pursuing financial damages from its trade secrets claims, but rather equitable remedies. These could include injunctions, disgorgement of profits, or measures to address unjust enrichment. The judge's ruling indicated that Apple's arguments to move away from a bench trial were not persuasive enough to warrant a change.
The background of this legal battle dates back to January 2020 when Masimo filed a lawsuit against Apple for patent infringement in the United States District Court for the Central District of California. Following a mistrial declared by the District Court in May 2023, the stay on the patent infringement claims has been lifted. The court has now scheduled a trial to resolve all remaining claims, starting on November 5, 2024.
The patents involved in this legal dispute are U.S. Patent Nos. 8,457,703 and 10,433,776. As the trial date approaches, the financial community will be closely monitoring the outcome of this high-profile case, which has significant implications for both companies involved. Masimo's stock rating and price target remain unchanged as the legal proceedings continue to unfold.
In other recent news, Masimo Corp. announced a CEO transition with Joe Kiani stepping down and Michelle Brennan assuming the role of interim CEO. Brennan, a former board candidate from Politan, brings her experience from Johnson & Johnson to the position. The company confirmed that key executives, including CFO Micah Young and COO Bilal Muhsin, will remain with Masimo, potentially providing stability during this transition.
The company also reiterated its third-quarter non-GAAP financial guidance, projecting revenues between $495 million and $515 million, with earnings per share (EPS) forecast set at $0.81 to $0.86. Masimo's board is actively reviewing options for its consumer audio and healthcare segments.
Analyst firms Needham and Piper Sandler have maintained their Hold and Overweight ratings, respectively, on Masimo shares. Finally, Masimo is exploring options for the separation of its consumer business, following a 23% increase in healthcare revenue and securing new hospital conversion contracts worth $134 million.
InvestingPro Insights
As Masimo Corp (NASDAQ:MASI) navigates its legal battle with Apple, InvestingPro data provides additional context to the company's financial position. Despite the ongoing litigation, Masimo has shown strong market performance, with a significant 67.18% price return over the past year and a 24.78% return in the last month alone. The company's stock is currently trading near its 52-week high, with a price that is 93.22% of its peak.
However, investors should note that Masimo is trading at a high earnings multiple, with a P/E ratio of 94.59. This valuation suggests that the market has high expectations for the company's future growth, possibly influenced by the potential outcomes of the legal proceedings.
InvestingPro Tips highlight that Masimo operates with a moderate level of debt and has liquid assets exceeding short-term obligations, which could provide financial flexibility as it pursues its legal strategy. Additionally, analysts expect net income to grow this year, indicating confidence in the company's operational performance despite the legal challenges.
For those seeking a deeper analysis, InvestingPro offers 13 additional tips that could provide valuable insights into Masimo's financial health and market position as the November 2024 trial date approaches.
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